Multiple choice

It is given that total assets including investment of Rs. 1,00,000 are Rs. 500000 and current liabilities are Rs. 100000. If 25% p.a. on net capital employed is considered as fair return, find goodwill by 2 years purchase of super profit method.

  1. Rs. 90,000

  2. Rs. 1,90,000

  3. Rs. 40,000

  4. Rs. 1,80,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

 Capital employed = Assets (excluding investments) - current liabilities                                     = 4,00,000 - 1,00,000 = Rs. 300000 Fair return = 300000*25% = Rs. 75,000 Super profit = Rs. 170000- 75000 = Rs. 95000 Goodwill = 95000* 2 = Rs. 190000

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